The stock market experienced a positive month in June 2023, with notable gains in major indices. The S&P 500 index rose by 6.47%, while the Dow Jones Industrial Average and the Nasdaq Composite posted gains of 4.56% and 6.8% respectively. June saw all 11 major S&P 500 sectors performing positively, with leading sectors including Consumer Discretionary, Industrials, and Materials. The Energy sector was the only one to decline, falling by 0.2%. Several key factors contributed to the stock market’s positive performance during this period.
One significant factor was the strong earnings season, with many companies reporting results that exceeded expectations. Additionally, concerns regarding inflation eased as the Consumer Price Index (CPI) showed slower growth in May compared to April.
Since October of the previous year, the SPX has been steadily rising. While a recent minor pullback had little impact on the market due to strong buying momentum, the index quickly recovered above its short-term moving average on June 26th. However, the market has become overbought in the short term, making it more challenging to break out above the upper trend line of the ascending uptrend. The three-day island breakdown on July 3rd mirrored a failed breakout. It is essential to pay close attention to two key resistance levels (4378, 4328) for the SPX in the upcoming week to gauge the correction’s behavior at this point. It is crucial to remember the wise advice: don’t fight the Fed, and don’t fight the trend either.
As mentioned in our video (https://youtu.be/5BogkhueTmE) two weeks ago, three factors – the Federal Reserve’s actions, artificial intelligence (AI), and companies’ earnings – will continue to impact the market’s movement throughout the remainder of the year. Of particular note, the inverted treasury yield curve, which has accurately predicted every downturn since 1969, is expected to play a role, albeit with a delay.